International Accounting Standards Essay Example | Topics and Well Written Essays - 4000 words - 1

International Accounting Standards - Essay Example When comparing its financial position and results of operations for the last year or years, competitors located in the same country like the United Kingdom can be easily compared and contrasted. A little difficulty arises when the financial statements of competing companies are compared and one company is located in the United Kingdom and the other stiff competitors are located in other countries like the United States, Japan, Canada, Brazil, China, India etc. They say that accounting is the language of business. Just as misinterpretation could be eliminated if people from Germany and Spain understand each other, misunderstandings and variances in the interpretation of the balance sheet and income statement are due to the different financial statement standards and methods of reporting which includes costing, billing and cost distributions. One major problem is that each country has researched and approved own generally accepted accounting principles individually. Generally Accepted Accounting Principles (GAAP) are the widely accepted set of rules, conventions, standards, and procedures that are used for reporting financial information which are researched and established by the Financial Accounting Standards Board of each country. (Sanella, 1991) One example of a generally accepted accounting principle is the United Kingdom's generally accepted accounting principle as to when to record a transaction as cash or receivable or another accounting data.Another problem is that the individual financial data ( Belkaoui, 1999) reported in the financial statements are cash inflows and cash outflows that are inherent and unique to each country. For example, average daily salary paid for the factory worker in competing companies will have a big disparity because salaries of production personnel in third world countries like India are estimated to be ten times lower than the average daily wage of a production worker in the Great Britain or Germany.Another problem is that the modes of transporting the goods in India or Brazil is not as advanced or fast as the mode of transportation in the United Kingdom or the United States.As of this time, there is no one size fit all when it comes to global accounting standards. In relation to this topi c, The European Union which is a conglomeration of individual independent states in Europe, including the United Kingdom, has come up with the European Court of Justice that gives decisions on cases within the European Union community even though each country has its own courts of law.The Tax consultants, accountants and financial statement analysts are at odds when comparing electricity, salary, rent, asset amortization and depreciation, assignment of values to assets between countries. We know that the standard of living in London is very much higher than the standard of living in China.Each accountant, financial stateme